On the one hand, people are predicting things are going to get very bad; on the
other, they are hopeful it's not going to be so bad. How ever you look at it, it
is going to be a tough year or longer depending on how fast leading economies rebound,
according to Regroup Associates Sdn Bhd executive chairman Chris Boyd.
He feels "we are lucky to have enjoyed only two years of real estate euphoria before
the westerly wind blew in".
"Our markets were only just beginning to pick up. Had this financial plague reached
us in, say, 2011 or 2012, then we could well have been caught with our pants down
as we were in 1997-98. In this respect, if we were going to suffer a global financial
crisis, it came at an opportune time for Malaysia.
"Right now, we are fundamentally strong and what has only gone up a little bit will
only suffer a limited decline," he said, anticipating that some developers may have
to struggle to survive.
"There is a growing crisis of confidence and we are peering into a dark pit of irrational
pessimism. Deals are falling over as buyers walk away for fear of a severe market
correction," the property consultant said.
Boyd opined the condominium market at the top end has been "the most speculative"
over the past three years, adding projects such as Troika and One KL � launched
at RM1,000 psf in 2005 and which have doubled in value or more � may see the secondary
market leading values down in this sector and sentiment is not helped by the number
of new properties coming up.
According to him, Kuala Lumpur currently has 19,170 luxury condos and serviced apartments
with a value of RM350psf or more and that new projects under construction or approved
could potentially add another 19,299 units. Even without a global financial crisis,
some indigestion is inevitable before the market regains equilibrium.
In contrast, he said the office space market enjoys a totally different set of dynamics.
"Rental, yields and capital values are well established. Demand for office space
has a set of underlying fundamentals that can be tied back to economic growth and
maturity. Best of all, there are no twitchy secondary players prone to panic and
flight."
He said office rentals by the second quarter of last year moved up RM2psf per month
to RM8psf per month after nearly a decade of stagnation and that capital values
had breached RM1,000psf and might have peaked at RM1,500psf. Meanwhile, yields were
down to five per cent or six per cent in anticipation of that growth.
However, Boyd surmised that despite the shortage of office space in the city, it
is unlikely there will be any growth in value in the current year as tenants are
going to "wait and see" before considering upgrading or expanding.
His advice is that with construction costs falling, now is a good time to start an office development in KL.